Andersen Faces Suit Over Sunterra Demise

The Orlando-based Time-share Operator Claims Its Failure Stemmed From The Accounting Firm's Errors.

June 15, 2002|By Todd Pack, Sentinel Staff Writer

Sunterra Corp., the Orlando-based time-share operator whose meteoric rise in the 1990s ended in financial collapse two years ago, blames its failure on the beleaguered Arthur Andersen accounting and consulting firm.

Sunterra is suing the firm in federal court in Orlando, saying Andersen "purported to audit" its financial statements for 1998 and 1999 and "should have discerned that Sunterra's financial condition . . . [was] materially overstated and conveyed a false impression of financial well-being."

Sunterra alleges that it was forced to file for Chapter 11 bankruptcy reorganization in 2000 and reduce its retained earnings by $363 million over two years because of the accounting firm's errors.

"The magnitude of Andersen's professional negligence is exemplified by the fact that Sunterra was out of money and in bankruptcy" within weeks of the firm signing off on its 1999 financial report, which raised no questions about Sunterra's ability to stay in business, the company said in its lawsuit, filed May 30.